Beware the New Frequent-Flier Rules

How to Get the Most for Your Miles Now

Airlines are altering rules for frequent-flier programs—to the detriment of many travelers.

Examples: Starting in 2015, Delta Air Lines Skymiles members will no longer earn one frequent-flier mile for every mile they travel. Instead they will earn between five and 11 miles for each dollar they spend on tickets. This new system will be rigged against occasional fliers—people who lack elite status with Delta will receive fewer miles.

Several airlines, including Southwest and JetBlue, already award frequent-flier miles based on money spent rather than distance traveled. And United will start doing so in March 2015. Meanwhile, participants in the American Airlines AAdvantage program might find that they need many more than the usual 25,000 miles to obtain an “AAnytime” one-way rewards ticket—the kind without blackout dates. American recently announced that henceforth, at least 30,000 miles or 50,000 miles will be required to obtain one of these tickets during busy travel times. Only 20,000 miles will be required during slack travel times.

Expect more changes to ­frequent-flier programs as airlines struggle to shape programs that make sense for their bottom lines—though not necessarily for their passengers. Four smart strategies for this new, rapidly changing frequent-flier world…

Stop hoarding miles and start cashing them in. Some travelers amass huge stockpiles of miles in their ­frequent-flier accounts, saving them until they have more time for leisure travel, perhaps in retirement. This is no longer a wise strategy. The airlines are likely to continue to make changes that devalue miles in the coming years. Holding on to miles in this environment is like holding on to cash when inflation rages—the longer you wait, the less your miles will be worth.

Redeem miles for international travel. As a rule of thumb, frequent-flier miles tend to be worth more these days when used to obtain tickets on international flights than on domestic flights.

Example: Travelers typically must cash in 25,000 miles for a round-trip economy-class domestic ticket. When purchased with cash, those tickets cost an average of $300 to $500, so by using frequent-flier miles, you can save around one cent to 1.5 cents per mile. For 40,000 to 60,000 miles, travelers often can obtain round-trip economy-class tickets to Europe that might cost $1,200 or more in cash-a savings of two to three cents per mile or up to triple the savings you might get on a domestic flight. If you don’t often fly overseas, consider cashing in miles to upgrade a ticket to business or first class.

Example: A business-class seat on a flight from New York to Los Angeles might cost around $1,500 more than an economy-class seat on the same flight. For 15,000 to 17,500 miles, it’s often possible to upgrade an inexpensive economy-class domestic ticket to business class. That’s a savings of up to 10 cents per mile. Never use miles for rental cars or merchandise on the Web site of the frequent-flier program, and use them for hotel rooms only when rooms are especially expensive. You’ll “overspend” your miles on these uses.

Example: A weekly car rental might cost $139, or 30,000 or 40,000 miles—a savings of less than half a cent per mile.

Use mainly cash-back cards. As airlines steadily degrade the value of their frequent-flier miles, it’s becoming increasingly clear that rewards credit cards that offer cash back can be better deals than cards that offer airline miles. Fidelity Investment Rewards American Express is one of the best cash-back cards. Cardholders earn 2% back on all purchases, with this money automatically deposited into a Fidelity account (Fidelity.com/cash-management/overview). Airline miles cards can’t match that.

Example: Spend $20,000 on that Fidelity American Express card, and you would earn $400 that you can use to buy anything you like. If you decide to buy an airline ticket, that $400 is usually enough for a round-trip coast-to-coast economy-class ticket. Spend that same amount on the typical airline card, and you earn 20,000 miles, less than you would likely need for a domestic economy ticket—if you can get a rewards ticket on the flight you want at all. What’s more, paying for your ticket rather than using frequent-flier miles means that you will earn thousands of new frequent-flier miles for the trip. This doesn’t mean that airline miles credit cards should be ignored entirely. Many of these cards currently are offering 40,000 to 50,000 miles just for signing up for the card and charging a few thousand dollars in the first few months. That’s definitely worth doing, especially with cards that do not impose an annual fee in the first year. Just stop using airline cards after you earn this bonus, and cancel any that charge an annual fee before the fee is imposed.

Exception: It might be worth using an airline credit card to purchase tickets on that airline. Doing so could earn you free checked bags or other bonuses.

Exploit the differences between frequent-flier program formulas. If you fly a lot and have frequent-flier ­accounts with multiple major airlines, the fact that different airlines now use substantially different formulas to award frequent-flier miles could work to your benefit. When several airlines offer comparable fares for a route you wish to fly, opt for…

Southwest, JetBlue or Delta (starting in 2015) if the flight is short, but the ticket price is relatively steep. (It will be especially worth leaning toward Delta if you have elite status.) And United will start doing so beginning in March 2015.

United, American or another carrier that still uses the traditional earn-a-mile-for-flying-a-mile system if the flight is long but inexpensive.

Giving Your Miles to Heirs

Airlines have quietly been creating new rules that make it more difficult—sometimes impossible—to bequeath frequent-flier miles to heirs.

The airlines argue that these miles are not assets owned by fliers, but rather nontransferable perks that the airline can award or revoke as it chooses. Fortunately, there is a way around these rules—just don’t tell airlines that the frequent-flier account holder has passed away. As long as heirs know the deceased person’s frequent-flier account user name and password, they can access the account and redeem remaining miles for rewards tickets or other benefits just as the original account owner would have. The tickets can be issued in anyone’s name at the time the miles are ­redeemed.

print

Source: George Hobica, founder of AirfareWatchdog.com, which reports on airfare bargains. He previously was a travel writer for magazines including Travel + Leisure and National Geographic Traveler.Date: July 1, 2014
Publication: Bottom Line Personal

Blogs

About Us

For over four decades, we’ve brought you the best in wellness and wealth advice from our family of experts. Isn’t it time that you get “inside” America’s trusted source? bottomlineinc.com brings you useful, expert, actionable information to help you navigate your world, saving time and money along the way. Bottom Line… empowering your life with expert advice!

Bottom Line, Inc. publishes the opinions of expert authorities in many fields These opinions are for educational and illustrative purposes only and should not be considered as either individual advice or as a substitute for legal, accounting, investment, medical and other professional services intended to suit your specific personal needs. Always consult a competent professional for answers specific to your questions and circumstances. Our content is further subject to our Terms and Conditions

Beware the New Frequent-Flier Rules

How to Get the Most for Your Miles Now

Airlines are altering rules for frequent-flier programs—to the detriment of many travelers.

Examples: Starting in 2015, Delta Air Lines Skymiles members will no longer earn one frequent-flier mile for every mile they travel. Instead they will earn between five and 11 miles for each dollar they spend on tickets. This new system will be rigged against occasional fliers—people who lack elite status with Delta will receive fewer miles.

Several airlines, including Southwest and JetBlue, already award frequent-flier miles based on money spent rather than distance traveled. And United will start doing so in March 2015. Meanwhile, participants in the American Airlines AAdvantage program might find that they need many more than the usual 25,000 miles to obtain an “AAnytime” one-way rewards ticket—the kind without blackout dates. American recently announced that henceforth, at least 30,000 miles or 50,000 miles will be required to obtain one of these tickets during busy travel times. Only 20,000 miles will be required during slack travel times.

Expect more changes to ­frequent-flier programs as airlines struggle to shape programs that make sense for their bottom lines—though not necessarily for their passengers. Four smart strategies for this new, rapidly changing frequent-flier world…

Stop hoarding miles and start cashing them in. Some travelers amass huge stockpiles of miles in their ­frequent-flier accounts, saving them until they have more time for leisure travel, perhaps in retirement. This is no longer a wise strategy. The airlines are likely to continue to make changes that devalue miles in the coming years. Holding on to miles in this environment is like holding on to cash when inflation rages—the longer you wait, the less your miles will be worth.

Redeem miles for international travel. As a rule of thumb, frequent-flier miles tend to be worth more these days when used to obtain tickets on international flights than on domestic flights.

Example: Travelers typically must cash in 25,000 miles for a round-trip economy-class domestic ticket. When purchased with cash, those tickets cost an average of $300 to $500, so by using frequent-flier miles, you can save around one cent to 1.5 cents per mile. For 40,000 to 60,000 miles, travelers often can obtain round-trip economy-class tickets to Europe that might cost $1,200 or more in cash-a savings of two to three cents per mile or up to triple the savings you might get on a domestic flight. If you don’t often fly overseas, consider cashing in miles to upgrade a ticket to business or first class.

Example: A business-class seat on a flight from New York to Los Angeles might cost around $1,500 more than an economy-class seat on the same flight. For 15,000 to 17,500 miles, it’s often possible to upgrade an inexpensive economy-class domestic ticket to business class. That’s a savings of up to 10 cents per mile. Never use miles for rental cars or merchandise on the Web site of the frequent-flier program, and use them for hotel rooms only when rooms are especially expensive. You’ll “overspend” your miles on these uses.

Example: A weekly car rental might cost $139, or 30,000 or 40,000 miles—a savings of less than half a cent per mile.

Use mainly cash-back cards. As airlines steadily degrade the value of their frequent-flier miles, it’s becoming increasingly clear that rewards credit cards that offer cash back can be better deals than cards that offer airline miles. Fidelity Investment Rewards American Express is one of the best cash-back cards. Cardholders earn 2% back on all purchases, with this money automatically deposited into a Fidelity account (Fidelity.com/cash-management/overview). Airline miles cards can’t match that.

Example: Spend $20,000 on that Fidelity American Express card, and you would earn $400 that you can use to buy anything you like. If you decide to buy an airline ticket, that $400 is usually enough for a round-trip coast-to-coast economy-class ticket. Spend that same amount on the typical airline card, and you earn 20,000 miles, less than you would likely need for a domestic economy ticket—if you can get a rewards ticket on the flight you want at all. What’s more, paying for your ticket rather than using frequent-flier miles means that you will earn thousands of new frequent-flier miles for the trip. This doesn’t mean that airline miles credit cards should be ignored entirely. Many of these cards currently are offering 40,000 to 50,000 miles just for signing up for the card and charging a few thousand dollars in the first few months. That’s definitely worth doing, especially with cards that do not impose an annual fee in the first year. Just stop using airline cards after you earn this bonus, and cancel any that charge an annual fee before the fee is imposed.

Exception: It might be worth using an airline credit card to purchase tickets on that airline. Doing so could earn you free checked bags or other bonuses.

Exploit the differences between frequent-flier program formulas. If you fly a lot and have frequent-flier ­accounts with multiple major airlines, the fact that different airlines now use substantially different formulas to award frequent-flier miles could work to your benefit. When several airlines offer comparable fares for a route you wish to fly, opt for…

Southwest, JetBlue or Delta (starting in 2015) if the flight is short, but the ticket price is relatively steep. (It will be especially worth leaning toward Delta if you have elite status.) And United will start doing so beginning in March 2015.

United, American or another carrier that still uses the traditional earn-a-mile-for-flying-a-mile system if the flight is long but inexpensive.

Giving Your Miles to Heirs

Airlines have quietly been creating new rules that make it more difficult—sometimes impossible—to bequeath frequent-flier miles to heirs.

The airlines argue that these miles are not assets owned by fliers, but rather nontransferable perks that the airline can award or revoke as it chooses. Fortunately, there is a way around these rules—just don’t tell airlines that the frequent-flier account holder has passed away. As long as heirs know the deceased person’s frequent-flier account user name and password, they can access the account and redeem remaining miles for rewards tickets or other benefits just as the original account owner would have. The tickets can be issued in anyone’s name at the time the miles are ­redeemed.

print

Source: George Hobica, founder of AirfareWatchdog.com, which reports on airfare bargains. He previously was a travel writer for magazines including Travel + Leisure and National Geographic Traveler.Date: July 1, 2014
Publication: Bottom Line Personal